Washington Weighs Wireless Regulation

Congress is showing an interest in increasing wireless regulation, especially when it comes to exclusive handset deals

By Olga Kharif

The will to regulate the wireless industry may be growing in Washington. On June 17 the Senate Committee on Commerce, Science & Transportation met to consider whether to step up regulation of an industry that has amassed 270 million subscribers in a little more than two decades. "Usually, things don't emerge as quickly without having problems," Senator Jay Rockefeller (D-W. Va.) told the committee. "Our regulatory methods are wholly insufficient."

How might Uncle Sam step in? Committee members aired a litany of complaints unearthed by a government-commissioned survey, ranging from dissatisfaction with wireless contracts to dismay over arrangements that let handset makers sell wares exclusively through a single carrier. While it doesn't appear that legislation would be drafted any time soon, some lawmakers are growing increasingly frustrated over what they consider a lightly regulated industry that has permeated everyday life. Almost one-third of the U.S. population now relies heavily or exclusively on cell phones for calling, and an increasing number of people are tapping wireless networks for Internet access via computers.

One of the biggest concerns for some lawmakers relates to exclusive handset deals, such as the arrangement that makes AT&T (T) the sole U.S. carrier of Apple's (AAPL) iPhone. Consumer groups and smaller rural carriers including Cellular South and U.S. Cellular (USM) say these exclusivity arrangements are among ways the largest carriers exert too much control over the market. After AT&T, the next-biggest service providers are Verizon Wireless, Sprint Nextel (S), and T-Mobile USA. The top four wireless carriers offer a total of 14 exclusive devices. "We view handset exclusivity as one part of a much larger problem of the growing power of service providers," says Michael Calabrese, vice-president of think tank New America Foundation.

What's Best for Consumers?

During the proceedings, Senator John Kerry (D-Mass.) chaired a panel on handset exclusivity. "Frankly, I don't know the answers to some of these questions," Kerry said. "Is [handset exclusivity] better or worse for innovation? Is it better of worse for the American consumer?" On June 15, Kerry and three other senators sent a letter urging the Federal Communications Commission (FCC) to investigate the issue. On June 19, Acting FCC Chairman Michael Copps said the commission will begin examining whether handset exclusivity hampers consumer choice and market competition.

Business Exchange

Track and share business topics across the Web.